British International Freight Association said its members ‘are being inundated with additional fees, despite having no control over the congestion and delays causing them’.
The British International Freight Association (BIFA) has objected to another container shipping line surcharge being added this month for its members, which it said “are being inundated with these additional fees despite the fact that they are not responsible for the service delays and port congestion that is causing them, and have no control over the congestion and delays”.
The trade association for UK freight forwarding and logistics companies said its members are “exasperated” by the news that one of the world’s leading container shipping companies – understood to be CMA CGM – will be levying an ‘Emergency Space Surcharge’ from South East India ports to the North Continent, the Mediterranean, North Africa, Red Sea & Latin America.
Its frustration at this specific new surcharge comes in the context of a wider UK sea freight market that is being tested to its limits, with massive increases in container shipping prices to around four times their level just two or three months ago, including additional surcharges, alongside shortages of equipment, port congestion, delays to cargo, and container lines diverting some services to mainland European box hubs.
“Forwarders do not like shipping line surcharges of whatever nature and, along with other groups, we have been challenging their legitimacy on behalf of our members – and their customers – for many years,” said Robert Keen, BIFA Director General.
“The line in question says the Emergency Space Surcharge is part of continued efforts to provide customers with reliable and efficient service. BIFA says that the lines are cashing in on a crisis in global container shipping, created in no small part by their own actions.
“Over the last few years, we have seen surcharges for fuel, equipment imbalance, the peak season and currency fluctuations. The number of surcharges and fees continues to grow – often with no real explanation or justification. For instance, what does an extra ‘administration fee’ or ‘container sealing fee’ cover that is not in the standard service offered?”
Forwarders do all they can to minimise the effects of the surcharges, but in the end costs need to be passed on to the customers “and there is sometimes an unfair perception that our members are to blame”, Keen adds.
Forecast failure
As reported variously during the last two months, a failure to forecast the massive demand swings during the pandemic has been pushing maritime supply chains to breaking point, with little clarity on when the situation will improve. Drewry senior consultant Stijn Rubens commented last month that in the space of a couple of months, the went from a complete collapse in demand, and requests from customers to delay cargo in transit because the shops were closed, to a situation where there are almost no ships idle. But that had led to a breakdown of the “conveyor belt” of ships and containers, and the return flow of empties, leading to congestion spikes and equipment shortages.
In the UK, the situation at the country’s major container terminals has become so dire that the Department for Transport has reconvened a container transport task force that had been set up during first lockdown then suspended over the summer, in an effort to reduce congestion and ease the flow of cargo through the supply chain.
Although the impact of surging container volumes combined with container port capacity constraints, in part due to coving pandemic outbreaks and protection measures, has effective large numbers of ports around the world, UK ports have been particularly affected because of stockpiling ahead of the UK’s departure from the European Union’s ‘single market’ and customs union at the end of this year.
European complaints over market failure
Nevertheless, late last month European shipper and forwarder representatives ESC and Clecat urged container lines to review their current operational and business practices and return to “respecting schedule reliability and service quality” in accordance with their contractual terms with customers, as ocean freight customers struggle to maintain supply chains in the current environment.
The European Shippers’ Council (ESC) and the European Association for Forwarding, Transport, Logistic and Customs Services (Clecat) said the current conditions in the ocean freight market are slowing economic recovery of European businesses, calling on all parties “to work together to ensure that the maritime supply chain becomes more reliable, predictable, and resilient”.
The two leading European associations said that since the outbreak of the global pandemic, the container imbalance and the reduction of capacity in liner shipping “has seriously impacted on the shippers and freight forwarders who have been seeking to ensure the fluidity of their global supply chains, which remains crucial during the ongoing crisis”.
Since these problems have continued, ESC and Clecat now “urge carriers to review their operational and business practices to ensure a regular flow of cargo and containers, whilst respecting schedule reliability and service quality in accordance with contractual terms”.
Denis Choumert, President of the European Shippers’ Council, noted: “The lack of vessel capacity and container shortages, partly caused by hundreds of thousands of containers stranded in US logistics chains, cannot alone explain the liners’ shortcomings. Customers are irked that liners have been taking advantage of the capacity crunch to increase revenues much beyond their costs.”
He continued: “Ongoing service unreliability, coupled with the record profits of shipping companies at times of crisis, clearly depicts a seriously disrupted market and demonstrates that carriers have been passing tremendous hikes on spot rates, imposing heavy surcharges above the fixed-term contractual rates.”
Willem van der Schalk, President of Clecat, noted: “Further frustration comes from the fact that we continue to be obliged to work under a responsive emergency planning mode to adapt to the very short carrier notices of equipment and slot availability, multiple container roll-overs and numerous additional surcharges. The costs for the freight forwarding industry are huge: they range from the re-booking of shipments to sometimes even losing customers, because there is simply no service made available by carriers.”
The associations continued: “European shippers and forwarders call on liner carriers to put an end to the present situation and to return to a situation whereby contractual agreements are respected, as further supply chain delays may risk the speed of the post-pandemic recovery of the European economy. Coming out of the crisis will need cooperation and good will from all the stakeholders.
“ESC and CLECAT, therefore, call on all parties in the supply chain to work together to ensure that the maritime supply chain becomes more reliable, predictable, and resilient.”
The two associations highlighted that liner shipping companies benefit from special legal privileges through the Consortia Block Exemption Regulation, “which has been renewed in April this year, to the dissatisfaction of the customers of liner services”. They noted that the European Commission has granted and extended this exemption from normal competition rules several times, “as it believes that customers benefit from efficiency gains, achieved through coordinated capacity management by the members of a consortia”.
They added: “However, this is not the case today. Such privileges are now excessive as they allow carriers to use tools to manipulate the market.”
They continued: “Whereas the US Federal Maritime Commission stepped up its scrutiny of liner activity this week, European industry is perplexed that the European Commission has not responded in any way to the current crisis. ESC and Clecat are convinced that the ‘new normal’ will need a better monitoring of the liner shipping activities and a new EU policy framework, which would benefit Europe’s economy and its citizens.”
Source: Lloyd’s
